| Hi Taylor:
Prices being what they are, I'm trying to tighten up my spending.
I've never felt the need to budget before so I'm starting from scratch.
Any tips? - Melanie
Hi Melanie: I lived the first half of my life mostly averse to
budgeting, but my wife helped me see the light and I'm glad you're
thinking of making a spending plan. It's good to keep in mind that
budgeting doesn't always equal penny pinching-a good plan is what
helps you buy a house or a business or retire early. With those things
in mind, here are my tips.
macro. Especially with inflation being one of the factors
pushing you to spend more thoughtfully, you need to avoid the
pitfall of only taking certain expenditures into account. In other
words, your budget can't just be about groceries. You need to
ask yourself a bunch of questions: are you saving for retirement?
Do you have an emergency fund? Are you saving for a house/kids'
college/vacations? How aggressively are you paying off your student
loans? The cost of milk might feel like the biggest burden in
your life, but the real culprit could be $500/month going to debt.
Look at the whole picture before you start moving money around.
2. Figure out a purpose. Over the years, it's become clear
to me that the most successful spending plans are goal-driven.
Whether it's paying off credit cards, saving for a new car, or
trying to retire by 50, you need some objective that will keep
you in line when spending opportunities pop up. If you're just
noticing more money leaving your checking account than normal,
that's a great reason to develop a spending plan, but it's still
worth setting a couple of goals. If nothing else, look to free
up an extra $250 a month to put into your retirement account or
stock portfolio. When we know why we're trying to save money,
we always do a much better job at it.
3. Try to be realistic. "I'll just eat beans and rice for
three months and save a fortune!" is not a good budgeting plan.
You want to set yourself up for success, even if that means keeping
the bar relatively low. Have you been spending $900 a month on
groceries? See if you can get it down to $800. Check out some
of the alternative cell service providers to see if you can cut
spending there, or focus on driving less and saving on gas. If
you do a lot of little things, it will add up without feeling
overwhelming. If you try and fail at one big thing, all you've
done is sabotage your plan.
| Some people
budget every single cent, others take a more general approach. I'm
open to whatever works for you and actually makes you accountable
for your spending. Set goals you believe in and I'm sure you'll be
fine. Good luck!
© Taylor Kovar
April 21, 2022
More "Go Far With Kovar"
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an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
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